The Mortgage Corner
Sales of new single-family houses in October 2017 were at a seasonally adjusted annual rate of 685,000, according to estimates released jointly today by the U.S. Census Bureau and HUD. This is 6.2 percent (±18.0 percent) above the revised September rate of 645,000 and is 18.7 percent (±23.5 percent) above the October 2016 estimate of 577,000.
It is the highest sales rate in 10 years, when it reached its 1.4 million unit peak in 2007 at the height of the housing bubble. Such soaring sales tell us home buyers are hurrying to buy before prices and interest rates rise any higher. But it’s still a meager supply, as there is just a 4.9-month supply of new homes on the market at the current sales rate, which is below the more normal 6-month total.
So there just are not enough homes to satisfy the surging demand for housing in a fully employed economy with wages and household incomes rising substantially for the first time since the Great Recession, as I’ve been saying for weeks. Part of the reason for higher demand—the Gen Y-er, millennial generation want their own living space. They now comprise 42 percent of homebuyers. And first-time buyer total is 32 percent, up from 30 percent last month.
There aren’t enough existing homes to meet demand, either. Total existing-home sales, https://www.nar.realtor/existing-home-sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, increased 2.0 percent to a seasonally adjusted annual rate of 5.48 million in October from a downwardly revised 5.37 million in September. After last month's increase, sales are at their strongest pace since June (5.51 million), but remain 0.9 percent below a year ago.
“There is solid growth in the number of sales contracts signed before construction has begun, a strong indicator that new single-family home production should continue to grow as we look ahead to 2018," said NAHB Chief Economist Robert Dietz.New home sales increased in all four regions. Sales rose 30.2 percent in the Northeast, 17.9 percent in the Midwest, 6.4 percent in the West and 1.3 percent in the South. Some of it may be replacement homes damaged or lost from the Hurricanes, there is clearly still a housing shortage.
And mortgage rates remain at historical lows. The 30-year fixed conforming rate is 3.50 percent, at one origination point. The Hi-balance conforming 30-year fixed is 3.625 percent for the same one origination point.
Harlan Green © 2017
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